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tv   Nightly Business Report  PBS  June 19, 2014 7:00pm-7:31pm EDT

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this is "nightly business report" with tyler mathisen and susie gharib. >> targeted and precise, president obama says taking action in i iraq is an option sending shock waves through the oil and gas market. >> inflation nation, janet yellen called the latest data noisy but how concerned should consumers and investors be about rising prices? >> and big miss, oracles earnings and one take away investors need to watch. that and more for "nightly business report" for thursday, june 19th. good evening, everyone. i'm susie gharib. >> i'm bill griffeth in for tyler mathisen. always glad to be here with you. >> same here. >> turmoil in iraq created
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problems in the gas market. the united states will increase support for iraqi security forces but reiterated american forces will not be returning to combat. the president's comments came as the iraqi government tried to prevent an advance into baghdad by sunni militants and while the president spoke, oil prices continued to rise. $115 a barrel for the first time this year while west texas intermediate, the u.s. benchmark rose to $106.43 michelle cabrera is on the ground tonight. >> reporter: after many consultations with his national security team, president obama said today he is willing to take limited military action in iraq, but only sundunder certain circumstances. >> we're developing more information about potential targets associated with isil. in going forward, we'll take
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targeted and precise military action if and when we determine the situation on the ground requires it. >> reporter: he was quick to followup and say the number of personnel would be limited to 300 military advisors. >> american combat troops are not going to be fighting in iraq again. >> reporter: as he spoke, the battle for iraq's largest oil refinery raged on. the associated press taking photos of smoke rising from the facility and militants controlling check points and a humvee. with the refinery still inoperative, gas lines have grown longer in the neighboring region where hopeful buyers waited hours and hours in line in 110-degree heat. this refinery is operating at full tilt, but has the capacity to process only 100,000 barrels of crude oil a day, not enough to offset the 300,000 barrels.
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>> now, the violence in iraq is one reason why gasoline prices here in the u.s. are unusually high for this time of year, and experts say they could keep going up. morgan brennan has more on what drivers can expect when they fill up at the pump. >> reporter: gas prices are rising. >> it's expensive, though. >> reporter: with the national average hitting $3.6 tod8 today according to aaa. the highest price since 2008 when gas hit $4 a gallon. >> it could affect our paychecks. >> reporter: the increase is largely thanks to the crisis in iraq as the countries's biggest refinery goes offline and oil companies like exxonmobil evacuate workers. that's driven the international price of crude oil higher and with it u.s. gasoline. >> it's pretty much guaranteed that gas prices are going to
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continue rising given the fact that oil costs more and makes it more expensive to produce gasoline. >> reporter: gas prices peak during the spring and drop lower in the sum ser, just in time for peak driving season, but analysts project that prices could keep climbing this summer. aaa says that won't cut into american's vacation plans but may affect other purchases. >> less eating out. for sure. more cooking at home, i guess. >> reporter: another factor that could push gas higher, a new bipartisan senate proposal that would increase the federal tax on a gallon of gas from 18 cents to 30 cents over the next two years. but with many in washington facing midterm elections, passing this proposal could be an uphill battle. drivers can expect to feel more pain at the pump this summer. i'm morgan brennan in fort lee, new jersey. >> on wall street, a slight gain on stocks was enough to send the s&p 500 further into record
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territory. it rose with the dow jones industrial average, which at the close gained almost 15 points to 16,921. the s&p was up to 1959 and the nasdaq, other direction and fell by three points to $43.59. investors flocked into gold sending prices up to 3%, $1300 an ounce, the sentiment toward interest rates in yesterday's federal reserve statement. >> well, it's not just gold and gasoline prices that are rising, but just about everything. federal reserve chair janet yellen didn't seem overly concerned about it at yesterday's news conference, but today some economists say she's too complacent. they are worried. how concerned should you be about inflation? steve liesman reports. >> reporter: you can smell it in the grocery store and you can smell it on an airplane and of course, you can smell itodor?
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inflation through the economy. since february inflation marched higher from 1.1% to the latest reading of 2% compared to a year ago in may. it's low by historical standards but it hurts consumers more because wages are rising so slowly and there could be more to come. the latest political uncertainty has driven up prices meaning it could cost more soon to fill up your car. janet yellens the chair of the federal reserve whose job it is to fight inflation thinks it's temporary. they are calling for a gradual rise to the 2% target. >> i think recent readings on for example the cpi index have been a bit on the high side, but i think it's that we're seeing noisy. i think it's important to remember broadly speaking inflation is evolving in line with the committee's expect takes. >> reporter: some economists
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aren't so sure it's noise. they are more worried about recent price gains. >> it is noisy, but there is stuff going on that i think deliberately is downplayed. i'm worried they will find themselves blind sided as inflation picks up and have to scamble and that's when the markets get upset. >> reporter: to be sure, the fed tends to look through events and it was right not to react to price gains in 2011 and 2012 as they gave way to lower inflation in 2013. yellen said she's not going to worry much unless wages rise. they would have to rise a lot to get the attention of the fed chair. if the inflation hangs around and keeps rising, the fed may not be able to ignore the smell for very long. for "nightly business report", i'm steve liesman. certainly inflation is something that investors also need to pay attention to. dominic chu looks at what rising prices could mean to your investment. >> reporter: when it comes to the stock market, certain sectors and industries will fair
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better than others in an inflationary environment. >> consumer stocks are very good for a bit of inflation, a little pricing power. industrial stocks are excellent as well as energy stocks. the stocks probably least likely to perform well would be financial stocks, utilities that really depend on a short term market. >> reporter: the story doesn't end with the stock market. gold is on the rise as investors buy it as protection against inflation and geopolitical unrest in iraq. as a result, gold mining stocks have been a recent beneficiary. one exchange that tracks the industry has been languishing over the past year but surged around 17% in just the last two weeks alone. other assets like bonds could also see a big impact from inflationary environment. bonds tend to lose value in times of rising prices and rising interest rates. >> the bond market is a risky
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place and i think people don't realize how risky bonds can be. if you look back at 1994 for example, the fed raised rates seven times during the course of that year and bonds actually lost people quite a lot of money. >> reporter: of course, just because the recent trend has been for higher prices, that doesn't mean everyone thinks it's a longer term phenomenon. >> we think the developed world anyway is in a period of sustained deflation and the companies successful for us in that environment are those that are driving their costs down lower and selling products that can actually save their customers money. >> reporter: so regardless of what you have in your portfolio, many experts believe now is the time to get a game plan in case just in case inflation becomes a bigger problem. for "nightly business report", i'm dominic chu. positive news for people looking to buy a home and get a mortgage. the rate fell slightly to 4.17%,
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hovering near historic lows. certainly one person who closely watches mortgage rates and interest rates and their impact on both consumers and american businesses would be frank keating, currently president and ceo of the america banking association and governor of oklahoma. good to see you again. >> thanks, bill, susie, hi. >> i think the artificially low rates and very low rates for first-time home buyers, single family home loans, i think those could go up and people still would find the price of a house and the rate to borrow to buy that house to be appropriate. the difficulty is that the house price itself is going up, even though the rates themselves are still low, and i think attractively low, so a
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combination of rising house prices, a modest recovery, obviously, young people with a lot of student loan debt and very rigged mortgage rules, we've seen less activity than we would like to see but this is a great time, this month is a housing month in america is a good time to buy a house with very, very low rates. >> and yet governor keating, we hear from people that how tough it is to get a loan, even if you have a good credit score and you have a good credit history. from the big things that you talk to the regional banks you talk to, do you see any of that changing any time soon in terms of qualifying borrowers to get a mortgage or any loan? >> the only way a bank makes money is by making loans. they pay employees and stock holders as the result of making loans, but the rules, the consumer financial protection burro applied to this industry,
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the qualified mortgage who are requiring 42% debt to income, this are a lot of people that can't meet that. to be a loan and have your dad or mother co-sign the loan, do creative financing and have the own owner collateralize part of it. we're looking understanding, some creativity and opportunity to really look at the borrower and get creative about the financing, but if we could do that, then i think you would see a lot more housing activity. >> there are those who feel there is a dire trend going on, and you eluded to it with those young people who are saddled with the student loan debt, you know, which totals more than a trillion dollars these days, there are those who feel maybe there is a lost generation that's not going to be able to afford a home for years to come. do you think that's the case? and whato you think that does for housing down the road? >> the first home i bought was a
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duplex when i was 27. today, it would be 37. young people my age back then, we all were trying to buy houses in our mid to late 20s, but now you can add five, six, or seven years to that. why is that? well, student loan debts are part of it. the absence of creative financing. the expense of a home compared to your income back then and now, a higher percentage of income but a savings account. a home is a great investment long-term and i would hope we get rationality in some regulations so young people would have a shot at it because right now they don't and they may have to wait until they are 37 to get their first home. >> yeah, that's about the case. former governor frank are the aba. thanks for joining us. still ahead on the program, investors in retailer coach are looking for signs of a turn around and today they got the opposite. details on why the stock was one of the worst performers on the s&p 500. that's coming up.
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well, a big miss for oracle. the company reported earnings and revenue below wall street expectations. the company earned 92 cents a share, 3 cents below estimates. revenue came in at $11.3 billion, also, slightly below what analysts were looking for. investors as a result sold the stock in after hours trade tonight pushing shares sharply lower in those extended hours down on the day. seema mody has been following that story and has the latest now. what do you see as a key take away for investors on the report? >> this is a disappointing report from oracle.
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sales coming in lower than expected. keep in mind, large cap text stocks like oracle have been in favor. oracle up about 8% over the past six months but due to the disappointing report, specifically about softer licenses, you're seeing investors question the investment thesis around it. the bold are saying oracle is sitting on cash, offering dividend and buying back stocks. that is a reason to stick with them some experts say expect to the debate come back whether it's a good investment, back to you. >> oracle and sap are two companies that battle it out over day in the business world. we'll compare them in the ultimate stock cup. that's a little later in the program tonight. a big sell off in coach after the retailer gave a gloom my outlook. at the investor day meeting today in new york city, coach expects revenue to decline in the low double digits for fiscal
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2015. coach plans to close 70 of its under performing stores. the stock tumbled almost 9% to $35.69. well, it was the opposite story for blackberry. shares of the smart phone maker surged after reporting a smaller than expected loss and revenue that beat estimates. the company says it spent less cash than expected and its gross profit margins were up from last year. blackberry's ceo says the turn-around plan is right on track. >> i have confidence we can break even or actually make money off the devices. next fiscal year we should start seeing the turn to profitability by growing. today, i'm focussing on balance sheets, focussing on generating cash. >> the stock popped more than 9.5% to $9.09. kroger out with strong earnings, the supermarket chain reported a 4% jump and upped the earnings forecast for the year.
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shares rose almost 5% to $49.66. and shares of pier one plunged. the retailer cut the guidance for the year and warned of continue margin pressures because of a highly promotional environment. the stock tumbled 13% to 15. $86. financial information company market saw its shares jump in its trading debut today. the public offering raised more than $1 billion after pricing its shares at $24 a share, that was in the expected range. company provides pricing and reference data as well as index and evaluation services. the stock rose 11% in the debut to $26.70. meanwhile, billionaire investor carl icahn is at it again. he's calling for family dollar to put itself up for sale immediately. he disclosed a stake in dollar storage chain this month. he said an overwhelming number of the company shareholders would be in favor of a sale and
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that three of his representatives should be added to family dollars's board. shares were down a fraction during the regular session today to $68.14 but after hours, when at letter from ichon was released the stack jumped at that point. another update on general eletric's offer. ge presented a revised proposal to the french government and under this new terms, ge would form three new joint ventures and sell the signaling business to the group for an undisclosed price. the deadline for the offer to be ac accepted or reject sd june 23rd. sales rose a fraction today. an agreement reached today in new york state to legalize medical marijuana on a limited scope, the governor and legislative leaders agreed to make certain forms of the drug available to patients that suffer from diseases like cancer
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and aids but won't legalize smokeable forms of the drug. what deserves a patent and what doesn't? the justices rule that you cannot take an idea, that's not that original figure out how to do it on a computer and pat tant it. alice corps should not have been issued a patent because they took an idea around for years and ran it through a computer. got that? congressman kevin mccarthy, a republican from california was selected to serve as the next house majority leader. mccarthy was chosen in an unusual election triggered by the surprising defeat of out going majority leader eric cantor. louisiana congressman steve will be majority left vacant but
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mccarthy's promotion. will investors have nbr's stock cup? we compare oracle and sap, o of the biggest rivals. the u.s. and germany are looking to advance in the world cup and will battle each other on the field next week. tonight in nbr's ultimate stock cup, we're looking at the us versus germany in a different way, the rival of oracle versus sap. >> reporter: larry ellison, one of the wealthiest people, twice a college drop out founded a
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software company in 1977. it later became oracle. headquarters in california, the 2013 revenue, more than $37 billion. the company was formed to build a database manager for the cia, a project code named oracle. that changed how businesses do bids. when corporate it departments run into trouble, they call oracle. the programs simplified inventory, shipping and supply chainish sh issues and the seco biggest software maker after microsoft. since 2004 it's focussed on software tailored to individual businesses. that's where oracle competes with sap, systems applications and products in data processing. founded in 1972 by five engineers that left ibm. it's headquarters in germany. 2013 sales topped $22 billion. it's key invasion creating large data programs for financial
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accounting, helping to move the world past the days of punch card. sap like oracle is finding growth not but forging a world but by adapting, reaching into the cloud, mobile and finding ways to handle big data. dan morgan weighs in on the oracle sap rivalry. so dan, who is a stronger player here, and what is the key reason for your choice? >> we are holders of oracle. we have over a million shares of the stock, that's the stock that we've been involved with from an investment perspective. kind of going back to things you featured with commence and the database area. the ability to acquire other companies and obviously, the cloud is a big issue going forward, who can get there quicker is the winner between these two companies. >> who does? i mean, smaller more nimble
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mpanies, sales force and other haves beaten them to the cloud and in many cases, so are they playing catchup, or what do you think? >> they are being forced to go to a subscription model as opposed to licensing model. both of the companies are trying to get there and, you know, the key is, you know, who can get there the quickest in terms of either acquiring it or building it internally. you're right, bill, both companies are forced to go into areas they could not normally want to go into but have to. >> so dan, you talk about acquisition versus building within, oracle has done hundreds of acquisitions, sap just the opposite build within. which is the smarter strategy? >> that's why we like oracle. your viewers probably remember people saw the big deal to get into enterprise resource planning software to compete directly against sap ten, 15 years ago. that's a prime example.
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two different strategies. we favor the strategy of acre session. they have done a great job when they are done with the acquisition integrating the new company. that's why we're more bullish towards oracle. >> how much of this is about larry ellison, as well? >> i don't want to go there in terms of his ego but it's a lot about larry ellison and he's been there forever. >> he won't be there forever. that's the question. [ laughter ] >> that's true. >> he may tell you differently but -- >> he will live forever, right, bill? >> right. >> he should be able to help them through this transition into the cloud. you probably have read some highlights out of sap. they lost key people over the last couple months in their initiative in the cloud and that's something their ceos had to answer for. >> you know, both aroracle and p were big inveinovators or are t
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going to have a place on the global stage or over taken by what bill was eluding to, sales force workday, companies like that? >> they are the mature cash cow companies. we have to remember they have huge instillation bases. oracle has 400,000 customers. they have an advantage over salesforce.com because they have such built in customer base that they can leverage to sell these products they create. they have an advantage but you're right, they are behind in terms of catching upright now. >> dan, thank you so much. dan morgan. >> thank you. all right. so you just heard which stock our guest prefers. we want to hear from you. is it oracle or sap? you can vote on our website at nbr.com and in the meantime, we have the results from tuesday's challenge where we asked you to
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choose between apple and samsung, the winner, apple by a wide margin. 66% of you chose apple. >> i'm not surprised. >> i'm not surprised, either. >> the guest we had, david garrity said apple was the one. >> back on the rise again. that's it. that's it for us. "nightly business report" for tonight. thanks for joining us. i'm susie gharib. >> i'm bill griffeth, have a good night, everybody. we will see you tomorrow. er
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